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This publication is available at https://www.gov.uk/government/publications/exporting-to-south-korea/exporting-to-south-korea

1. South Korea export overview

In 2014 South Korea was the world’s 13th largest economy by Gross Domestic Product (GDP) Purchasing Power Parity (PPP) according to the International Monetary Fund (IMF). It has a GDP per capita (PPP) of USD 35,277 – 3 times that of China and almost equal to Japan’s.

There are over 150 British companies currently doing business in South Korea. Well known brands such as Standard Chartered, Jaguar Land Rover, BA, Bentley and Burberry currently have an active presence in the South Korean market.

Benefits for UK companies exporting to South Korea include:

the European Union (EU)-Korea Free Trade Agreement (FTA), the only EUFTA in east Asia/Pacific, is estimated to be worth over £500 million to UK business each year

South Korea is a designated high growth market for UK exports, increasing year on year since 2009

Korean public has a taste for British culture and respect for UK goods

A ‘direct transport rule’ is in place for shipments to Korea. UK companies are not fully benefitting from the tariff liberalisation schedule, as most UK shipments tend to go via Singapore or Hong Kong. Department for International Trade (DIT) South Korea are pushing for this rule to be amended.

Sector specific challenges in the market include:

certification processes for labelling foods as ‘organic’

low pricing structures and reimbursement for pharmaceuticals

restrictions in the provision of legal and professional services

language barrier means translators and interpreters will be needed for certain aspects of business

3. Growth potential

3.1 Economic growth

South Korea has a GDP of over USD 1.7 trillion in 2014, around 1.6% of global GDP.

South Korea is currently taking measures to fight slowing economic growth, but despite this the economy grew by 3.3% in 2014 and according to the Bank of Korea, is predicted to grow by 2.8% in 2015.

3.2 Free Trade Agreements

In July 2011, the EU-South Korea FTA came into force. This is the most comprehensive FTA ever agreed between 2 parties. It’s predicted to be worth at least £500 million per annum to the UK economy.

97% of tariff barriers between Korea and the EU will be eliminated within 3 years and EUR 1.6 billion of duties for EU exporters will be abolished annually.

These free trade agreements mean that parties enter into legally binding commitments to relax access to each other’s markets’ for goods, services and investment.

3.3 Major global conglomerates

Korean companies such Samsung (the world’s largest electronics company), LG and Hyundai are now global names.

There are opportunities to work with them on every continent, but particularly in the Middle East and Association of Southeast Asian Nations (ASEAN). This is where their contracting companies use international services and specialist foreign made equipment and components.

Major Korean contractors are beginning to win projects and invest in developed markets, particularly in energy and rail.

3.4 Foreign Direct Investment (FDI) incentives

The South Korean government aims to transform the country into one of the top 10 business friendly economies in the world. It’s keen to encourage foreign investors and has been making efforts to ease excessive regulations and provide incentives for FDI.

4. UK and South Korea trade

The EU-Korea FTA is estimated to be worth £49 billion to Korea and the EU. This represents a doubling in EU-Korea bilateral trade in the next 20 years compared to a scenario without the FTA.

UK goods exports to South Korea have risen 47.5% from 2010, the year preceding the FTA, to 2014. Korea made the single largest contribution to UK goods export growth in 2012 and exports reached a new historical peak in 2013.

South Korea is the third largest market in Asia/Oceania for UK exports (excluding the transport hub of Hong Kong) and the 13th worldwide overall.

Top 10 UK exports of goods (2014 - excluding oil):

Nuclear reactors, boilers, machinery, parts.

Road vehicles.

Optical, measuring, precision, medical and surgical instruments.

Electrical machinery, sound recorders, television image.

Pharma products.

Pearls, Semi-Precious stones and precious metals.

Beverages and spirits.

Iron or steel.

Over the last 45 years, the UK has been the second largest EU investor in South Korea, in cumulative terms.

5.1 Nuclear and nuclear decommissioning

South Korea’s 23 (20,716 Mwe) nuclear power plants supply about 30% of national electricity.

Under the National Energy Plan Korea will:

increase nuclear’s share of generation to 59% of national electricity demand

have 41% of installed nuclear electricity generation capacity in place by 2030

have 11 new nuclear power plants in commercial operation by 2021

South Korea’s oldest operating reactor unit, Kori 1, will close in 2017 without a licence extension. It will become South Korea’s first nuclear power unit to enter the decommissioning phase. Korea is fairly new to decommissioning and waste management and there are opportunities for UK expertise in this field.

There are also opportunities in new build nuclear plants in third countries. Korea construction and infra firms have increased their reach across Asia-Pacific and the Middle East. This includes the construction of nuclear power plants, most notably in the United Arab Emirates (UAE) where 4 nuclear reactors are being built under a USD 20 billion contract. There are opportunities for UK companies to work with these Korean firms.

5.2 Fast Moving Consumer Goods (FMCG) and online retail

South Korea is an enticing market for competitive British retail brands. Following the EU-Korea FTA, there has been a consistent growth in the demand for UK retail brands in Korea, specifically for fashion, cosmetics, food and drink, baby and other consumer goods.

Growing numbers of lifestyle shops is contributing to the diversification of distribution channel in the market and this is generating new opportunities for UK’s small, but competitive consumer goods brands.

The Korean fashion market is a major location for many international brands. Despite strong competiton from local brands, there is still growing demand for new international fashion items. Currently, men’s fashion, casual wear, casual footwear, fashion accessories are seeing increasing demand.

The Korean cosmetics market is highly advanced with Korean cosmetics shopping enticing visitors from the rest of the Asia-Pacific region. As consumers are becoming more knowledgeable, their interest in the natural and organic skincare market has grown rapidly.

Department for International Trade (DIT) South Korea is exploring new online sales channels and E-Exporting opportunities for all these sectors.

5.3 Fintech

Korea is a digitally advanced and highly connected nation with smartphone penetration of 83% and advanced 4G infrastructure.

Korea’s financial technology industry was until recently constrained by government regulation and a lack of domestic venture capital. Korea is now looking to turn this situation around and seeking support from more experienced fintech markets, such as the UK.

Entiq (Level39), world’s leading Fintech accelerator in London has recently signed Memorandum of Understanding (MoUs) with Korea’s Financial Services Commission (FSC) as well as Seoul Metropolitan City to work together in Fintech and other ICT fields, as the UK is widely recognised in Korea as an expert in this field.

5.4 Advanced automotive

Korea is world’s fifth largest automobile producer by units produced.

It’s looking use its strong base as traditional automotive manufacturing power to expand into advanced automotive technology and innovation, especially around low carbon vehicles and driverless technology.

An eco-friendly vehicle programme has been created by the government to support these technologies’ development. South Korea aims to be among the global top 4 nations for low carbon and green vehicles.

The UK is increasingly gaining attention in Korea as an innovation leader, especially in driverless technology, and opportunities are increasing from this.

7.1 Standards and technical regulations

KATS are frequently referenced in government regulations and technical specifications, and implemented by public agencies in procurement. KATS are continually working to bring Korean standards in line internationally.

7.2 Intellectual Property Rights (IPR)

The patent and trademark registration system in South Korea favours the first company to register successfully with KIPO. Therefore, the sooner you register the better. Companies that do not register in South Korea will be disadvantaged in any future legal disputes over IPR.

7.3 Labelling

Country of origin labelling is needed for commercial shipments entering South Korea. Korean language labels must be shown at the time of customs clearance. They can be attached locally on products in the bonded area, either before or after clearance.

Further labelling and marking requirements for products such as pharmaceuticals and food, are covered by regulations from the government agencies responsible for them.

The Certificate of Origin should indicate the item’s description, quantity, price, place of origin, exporter and importer, and be written in English, Korean or French. For items shipped directly to South Korea from their country of origin, the Certificate of Origin should be issued by the relevant customs authorities or Chamber of Commerce. The items should be clearly marked with their country of origin.

8. Tax and customs considerations

8.1 Sales tax

South Korea has a basic Value Added Tax (VAT) rate of 10%. The sale of cultural items, eg newspapers, books, magazines may be exempt.

The following transactions qualify for zero rated tax status:

the export of goods

the supply of services outside Korea

the supply of international transportation services by vessel or aircraft

the supply of certain goods or services paid in foreign exchange

8.2 Company tax

Korea’s corporate tax rates as of January 2015 are:

10% on the first KRW 200 million

20% for the tax base between KRW 200 million and 20 billion

22% for the excess

There are special tax exemptions under the FDI incentives scheme. For more go to InvestKorea.org.

8.3 Income tax

South Korea’s Income tax for non-residents applies only to their Korean earned income. Korea has both a flat tax option of 17.5% and a progressive tax option that will reflect income.

8.4 Customs

In declaration and payment, the person wanting to import goods makes a declaration on the payment of the customs duties direct to the customs house.

In notice of assessment, the customs house imposes and collects customs duties.

In most cases, businesses use the declaration and payment method. The notice of assessment system is mainly used for the imposition of minor customs duties, such as on passengers’ and crews’ goods, unaccompanied baggage and postal matters.

8.5 Documentation

Companies with no record of trade law violations don’t need customs inspection. The only exception relates to high-risk items imported into South Korea.

Importers can make an import declaration online using the Korean Customs Service’s (KCS) Electronic Data Interchange (EDI) system for paperless import clearance. You don’t need to visit the customs house.

Import declarations may be filed at the customs house before a vessel enters a port or before the goods are unloaded into bonded areas. Goods don’t have to be stored in the bonded area if the import declaration is accepted.

Exporters can file an export notice to Korean Customs using computer based shipping documents at the time of export clearance. All commodities can be freely exported unless they are included on the negative list.

Korean Customs allows free customs entry to goods brought into South Korea that are carried by hand by foreign business people (such as laptop personal computers) for use during their stay in the country.

Generally, Korean Customs makes a note on the traveller’s passport which requires them to take the items out of South Korea when they leave.

10. Entry requirements

All visitors must have a valid passport and visa, although UK nationals can stay up to 90 days without a visa.

Foreign investors need to apply for a Foreign Investment Visa, known as a D-8. You need to apply for a D-8 to the South Korean embassy in London. Your agent will fill in a form that has to be submitted to the immigration authorities.

Anyone staying in South Korea for more than 90 days must apply for an alien registration card via the South Korean embassy in London.

10.1 Travel advice

If you’re travelling to South Korea for business, check the travel advice beforehand.

11. Contacts

Contact the team in South Korea for more information and advice on opportunities for doing business in South Korea.